Theories of Tying and Implications for Antitrust

This paper first reviews economic theories for why firms tie their products and then discusses our views concerning what this review implies concerning optimal antitrust policy for tying cases. The review considers efficiency rationales for tying, price discrimination rationales, and various exclusionary rationales that have recently been put forth. We specifically discuss the Chicago School view that tying should raise no antitrust concern and explain when that logic breaks down. In our discussion of optimal antitrust policy concerning tying our main point is that, because of the prevalence of efficiency driven tying in real-world markets and the difficulty that courts have in reliably identifying all the welfare consequences of a tie, in general there should be a high hurdle required for intervention in tying cases